In firm X,labor costs are 85 percent of production costs,while in firm Y labor costs are 40 percent of production costs.A 20 percent increase in wages would increase production costs by:

Question

Quizplus · Accepted Answer

The question asks about the percent increase in production costs for both firms after a 20 percent increase in wages. We can calculate the increase by multiplying the labor cost percentage by the percent increase in wages. So, for firm X, the increase would be 85% * 20% = 17%. For firm Y, the increase would be 40% * 20% = 8%. Therefore, the answer is D, which shows that firm X's production costs would increase by 17% and firm Y's would increase by 8%.

In Firm X,labor Costs Are 85 Percent of Production Costs,while